May 17, 2012

Auction Houses and Credit Card Fraud

The Art Newspaper reports on an interesting and widespread problem with the art market in the United Kingdom. It seems fake credit cards have been used to steal art up for auction. And as the report notes, the problem flows all the way to Bonhams and Christie's, with as many as 30 auction houses reportedly affected.

Says one anonymous auction house director:

"[The problem is that people] were buying goods over the phone and picking them up before the transaction had cleared,” says the director of one of the defrauded auction houses, who wishes to remain anonymous. “We trusted that banks would be doing checks at their end. Aside from the usual identity checks we can’t tell whether the card that people use over the phone is theirs."

It is an obvious problem, but one that has not really been discussed. If buyers are allowed to remain anonymous, it is a perfect environment for criminal intervention. Auction houses play such a crucial role in the art market, and as a consequence play an important role in the way we transfer these important parts of our collective cultural heritage. But these institutions are poorly designed to safeguard against theft, looting, forgery, and fraud.

The way in which auction houses conduct business today has been
revolutionised; online, anonymous and increasingly international bidding
is now commonplace. This spate of frauds, however, suggests that the
art market’s financial procedures have yet to catch up.